By Michael Kitchen, MarketWatch
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LOS ANGELES (MarketWatch) — Regardless of whether a new iPhone will be a game-changer for Apple Inc. /zigman2/quotes/202934861/composite AAPL +1.61% , the device has the potential to juice the second-largest economy on Earth, or so say economists at Bank of America-Merrill Lynch.
Sure, Chinese consumers are increasingly turning away from the iPhone, according to recent data. But the fact that the popular handset is assembled in mainland China, and that many of its components are made there or in neighboring Taiwan, has the potential to act as a sort of stimulus for those economies.
In a note out last week, Merrill Lynch’s Ting Lu and Marcella Chow said that the iPhone 6, by itself, “could add about 1% per month to China export growth for the rest of 2014.”
This prognosis assumes that 17% of the new iPhones won’t leave China — which is, after all, the world’s largest market for smartphones — and that the assemblers will receive about half the average sale price, which Merrill Lynch (writing ahead of Tuesday’s Apple event) estimated at $607.50.
Taiwan, meanwhile, would enjoy an even bigger iPhone lift to its trade account, with Lu and Chow projecting a 2-percentage-point-per-month bonus to export growth in August-October, followed by a 1-point monthly boost through January 2015.
“These numbers are not that small,” they wrote. “Export growth of China and Taiwan was only 4.9% and 4.4% year-on-year in the second quarter of 2014, respectively, so a boost of 1 to 2 percentage points to headline export growth is no small matter, especially for the currency market which closely tracks export-growth numbers.”
Of course, there’s also the chance that the boom in outbound iPhone shipments could displace other exports — this, according to a report Friday in TechCrunch.
The report cited unnamed sources as saying that Apple is shipping such “a massive number of iPhones and whatever other units Apple announces for the fall season” that it is gumming up the supply chains of other manufacturers.
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“Apple shipments via major concerns like FedEx /zigman2/quotes/203047719/composite FDX +0.06% and UPS /zigman2/quotes/201245396/composite UPS -0.69% are said to be ‘incredibly high’ for the holiday quarter,” the report said. “The company is apparently flooding its channels with devices, causing shipments for other ‘top-tier’ device makers to be delayed to make way for Apple products.”
And it’s not just exports...
Beyond the impact on the trade data, Merrill Lynch also sees the potential for the iPhone to add to overall economic growth, though really just in the case of Taiwan.
“Despite the hefty export bills brought by iPhones, China is little more than the low-end assembly line of the whole iPhone value chain,” Lu and Chow said.
Using the iPhone 5S as an example, they estimated mainland China added just $8 to the average 5S retail price of $749.
“The value added in iPhone 6 might be only slightly improved, so the launch of iPhone 6 will only have a negligible impact on the growth of China’s GDP this year,” they wrote.
But Taiwan, with its much smaller economy and its higher-end role in the iPhone’s production, is estimated to add about $25 worth of inputs for each iPhone 6 handset. As a result, Merrill Lynch sees the Apple device as adding 40 basis points (0.4 of a percentage point) to Taiwan’s 2014 GDP growth, which it is tipping at 3.4%.